SINGAPORE: While the ongoing US-China trade dispute has economic implications for Singapore, the current slowdown experienced here does not warrant immediate stimulus measures, said Prime Minister Lee Hsien Loong on Sunday (Aug 18).
But the Government stands ready to respond promptly with “appropriate interventions” to sustain the livelihoods of workers here should the country’s economy get much worse, he said in his Chinese National Day Rally speech.
Mr Lee pointed out that Singapore’s economic growth has slowed significantly, primarily due to the weakening of global demand and international trade that has affected the country’s manufacturing sector and trade-related services.
Additionally, a slump in electronics has impacted the country’s overall economic performance while retail continues to be pressured by online shopping, he added.
Still, other sectors have been less affected, and retrenchment and unemployment rates remain low.
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“BAD NEWS” IF US-CHINA RELATIONS DETERIORATE FURTHER
In the speech, the Prime Minister sketched out the significance for Singapore of the ongoing trade tensions between the United States and China, specifically on external relations with each superpower as well as on the country’s economy.
Mr Lee said Singapore is “good friends” with both the US and China and “want to remain so”.
The US, for one, is Singapore’s major security partner and besides training with each other and counter-terrorism cooperation, the country also buys advanced military equipment like fighter aircraft and missiles from the former, he said.
US companies’ investments in Singapore also “far out-strip” that of any other country in terms of value and scale, thus creating many quality jobs for Singaporeans, he added.
On the other hand, China is Singapore’s largest export market and both countries have extensive economic cooperation. The three government-to-government initiatives in Suzhou, Tianjin and Chongqing are examples, Mr Lee said.
Singapore is also the only other sovereign country besides China to have a majority ethnic Chinese population, thus making the bilateral relations “unique”, he added.
This is why Singapore must always be “principled” in its approach and not be swayed by emotions, the Prime Minister said.
“Regardless of who we speak to, whether it is in Singapore itself, Beijing or Washington, our views remain the same,” he said. “When we can agree with either major power, we will do so. When we cannot, we must maintain and explain our stand.”
As for how the tensions play out in the economic space, Mr Lee used US company Apple’s smartphones and its Chinese counterpart Huawei’s as examples.
He pointed out that today’s smartphones are designed and assembled in many countries. If the US will not allow companies like Huawei to use American microchips, and China does likewise with Apple, then both companies will have to develop their own chips, devices and telecommunications system.
The result could be that for visitors to these two countries, they will have to bring multiple smartphones to stay connected, he said.
“In such a bifurcated world, we still hope to be able to communicate with all our friends conveniently. So our bigger headache is: Which telecommunication should we install in Singapore?”
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Mr Lee said that should US-China relations continue to deteriorate, the world will continue to be split into different blocs and this will affect Singapore’s economic growth.
“Singapore companies that export to China will be impacted. So too will our companies that have factories in China and export to the US,” he said.
He also warned that companies that decide to leave China will not necessarily come to Singapore to set up shop either, given that there are other lower cost countries and are closer to major markets. For example, clothing manufacturers will likely shift to Vietnam, Bangladesh or Cambodia while furniture makers will likely move to the Philippines, he said.
“Overall, should US-China relations continue to deteriorate, it is bad news for both the world and Singapore,” Mr Lee said.
STILL ATTRACTIVE DESTINATION
Amid the challenging economic climate, however, Singapore continues to attract major investments, the Prime Minister said.
He cited the example of Finnish oil company Neste that announced last month it is spending €1.4 billion (S$2.15 billion) to expand its renewable energy plant here, which will create high-quality jobs.
He said Neste CEO Peter Vanacker chose Singapore because of reasons like good geography and business environment as well as its workforce.
Mr Lee said Singapore can take heart from Neste’s commendation as it reflects the country’s excellent reputation among investors.
“Faced with uncertain future economic prospects, we need to work all the harder to protect this trust that investors have in us,” he said.
He, together with National Trades Union Congress (NTUC) secretary-general Ng Chee Meng, had discussed such matters with labour union leaders recently. While workers are worried, the slowdown “has not significantly affected jobs”, the Prime Minister noted.
“The Government and our union leaders are watching trends closely. We are prepared,” Mr Lee said.
“We have experienced cyclical downturns like this in the past, and we are confident we can take this one in our stride.”